Brexit shadow over Tata's UK asset sale

Process could be halted for some time; British business minister to attend company's board meeting today

Brexit is proving to be an additional hurdle for Tata Steel’s plans of selling its loss-making UK assets.

Sources close to developments told Business Standard on Thursday Tata Steel, the largest steel maker in the country, is expected to temporarily halt the sale process, amid uncertainties over trade ties between the UK and the European Union (EU) countries.

The company’s board of directors will meet in Mumbai on Friday. The meeting would also be attended by Sajid Javid, a member of British Parliament and secretary of state for business, innovation and skills.

Sources said Javid is coming to make sure Tata Steel does not leave the UK.

 

Ahead of the board meeting, investors remained nervous. This was reflected in the share price of Tata Steel, which fell six per cent on the BSE in early trade.

Early this week, it was thought no major announcements would be made after the board meeting, and a long discussion on the bids received for Port Talbot would be held.

However, Bloomberg reported potential buyers had told Tata Steel that the UK’s surprise vote to leave the European Union last month raised uncertainty about the viability of its operations there. According to the report, at least four shortlisted bidders have pulled out of the process.

In March, Tata Steel announced its intention to sell the entire 10.5 million-tonne UK assets and also managed to do away with the 4.5 million-tonne long products division to Greybull Capital.

“The board meeting tomorrow (Friday) could also have an announcement on the sale of the speciality steel and tube business, which does not fit in the company’s current asset profile,” said the source.

“Liberty, Greybull Capital, and a third company (name not revealed) are said to have been shortlisted by Tata Steel for the sale of the speciality unit,” said the source.

Amid all uncertainties that the UK is expected to go through after Brexit, Germany-based Thyssenkrupp could be a frontrunner to pick up a stake in Tata Steel's Netherlands asset.

“We dont think its Netherlands alone which is being discussed for stake sale by Tata Steel. The company could also be looking to bring the UK unit to the table for a joint venture,” said a source.

Thyssenkrupp would still be interested in the Netherlands business as the products produced by this unit carry a licence from Thyssenkrupp.

The German company, through a joint venture, could be looking to consolidate its operations in the region.

“Since steel prices globally have picked up since January, there is a possibility that Tata Steel will also bring Port Talbot on the deal table,” said the source.

Experts said a stake sale only in the Netherlands will make Tata Steel a small player in the steel industry in the region. With a part sale of the UK assets as well, Tata Steel will remain one of the large players in the steel industry of the UK if not the largest steel maker in Britain.

STILL, A LONG ROAD AHEAD
Tata Steel’s plans to exit its loss-making UK unit have encountered another hurdle in Brexit. Here is a look at the troubled journey:

2007

• Corus acquired by the Tata group for $12 billion (about Rs 50,000 crore then)

2009

• At the height of the global financial crisis, its Teesside Cast Products was mothballed. Work force cut by 1,700

2012

• Tata Steel Europe announced job cuts for 900 in the UK

2015

• Tata Steel Europe announced job cuts for 1,200 in the UK

2016

• January: Tata Steel Europe announced 1,050 job cuts in UK
   
• March: Announced sale of UK division
   
• April: Signed an agreement with Greybull Capital to sell 4.5 million-tonne long product unit for nominal £1
   
• June 1: Completed sale of long product unit to Greybull